AUTHOR NAME- Snehil Singh, B.A. L.L.B., Fifth Year.
NAME OF INSTITUTION: Babu Banarasi Das University, Lucknow
Citation: [2025] 2 S.C.R. 343 | Case Type: Civil Appeal /3334/2023 |
Date of Judgement: 03 February 2025 | Judgement by: Hon’ble Mr. Justice Bhushan Ramkrishna Gavai |
Petitioner: Godrej Projects Development Limited | Respondent: Anil Karlekar & Ors. |
Disposal: Appeal Partly Allowed | Order/ Judgement: Judgment |
FACTS:
On January 10, 2014, the complainants booked an apartment in the “Godrej Summit” project located in Sector 104, Gurgaon, Haryana, by submitting an application form along with an initial payment of ₹10,00,000. Later, on June 20, 2014, the appellant issued an allotment letter, assigning Apartment No. C-1501 on the 14th floor of Tower C to the complainants. Following this, both parties signed an Apartment Buyer Agreement (referred to as “the Agreement”).
After completing the construction, the appellant applied for an Occupation Certificate from the Director, Town & Country Planning Department, Haryana, which was granted on June 20, 2017. Subsequently, on June 28, 2017, the appellant offered possession of the apartment to the complainants. However, instead of accepting possession, the complainants decided to cancel the allotment and demanded a full refund of the amount they had paid.
On September 29, 2017, the complainants sent a legal notice to the appellant, seeking a refund of ₹51,12,310. When they did not receive a satisfactory response, they filed a consumer complaint (No. 262 of 2018) before the National Consumer Disputes Redressal Commission (NCDRC) on November 14, 2017. They requested the Commission to direct the appellant to refund the total amount of ₹51,12,310, with 18% interest per annum, calculated from the date of each payment until full recovery.
On October 25, 2022, the NCDRC issued an order, instructing the appellant to deduct only 10% of the Basic Sale Price (BSP), amounting to ₹17,08,140, as a cancellation charge. The remaining ₹34,04,170 (i.e., ₹51,12,310 minus ₹17,08,140) was to be refunded to the complainants along with 6% simple interest per annum from the date of each payment until the refund was completed, with a deadline of three months for compliance.
Dissatisfied with this decision, the appellant filed a Review Application before the NCDRC, challenging the order. However, on December 5, 2022, the Commission dismissed the review request. Following this, on January 10, 2023, the appellant approached the Supreme Court, appealing against the NCDRC’s order dated October 25, 2022.
On April 24, 2023, while hearing the appeal, the Supreme Court granted a stay on the impugned order. However, the stay was conditional— the appellant was required to refund the complainants’ paid amount after deducting 20% as an earnest money deposit, along with 6% interest per annum from the date of cancellation of the contract.
ISSUE RAISED:
- Is it fair and legal to forfeit 20% of the Basic Sale Price (BSP) when a buyer cancels the purchase?
- Does this forfeiture clause favor only one party, making it an unfair trade practice under the Consumer Protection Act, 1986?
RULE OF LAW:
Section 74 of the Indian Contract Act, 1872[i]:
- This section focuses on compensation when a contract is broken and a penalty is already mentioned in the agreement. It states that the compensation given should be fair and should not go beyond the penalty specified in the contract.
Section 2(1)(r) of the Consumer Protection Act, 1986[ii]:
- This section explains what qualifies as an “unfair trade practice.” It includes actions where businesses use deceptive or unfair methods while selling goods or services to consumers.
REASONING:
The Supreme Court stated that forfeiture clauses should be fair and not act as a punishment. It found that deducting 20% of the Basic Sale Price (BSP) was too high and not a true estimate of actual losses.
The Court highlighted that contract terms that heavily favor one party, especially when the buyer has little negotiating power, are unfair. Such clauses were seen as exploitative and fell under unfair trade practices as defined in the Consumer Protection Act.
The Court agreed with the NCDRC’s ruling to cap the forfeiture at 10% of the BSP, ensuring that the deduction reflected a fair assessment of potential losses rather than being a penalty.
HELD:
This appeal challenges the final judgment issued on October 25, 2022, in Consumer Complaint No. 262 of 2018, where the National Consumer Disputes Redressal Commission (NCDRC) ruled in favor of the complainants. The NCDRC directed the appellant to deduct only 10% of the Basic Sale Price (BSP) as a cancellation charge for the apartment and refund the remaining amount with 6% simple interest per annum, calculated from the date of each payment until the refund is completed. Dissatisfied with this decision, the appellant filed the present appeal under Section 23 of the Consumer Protection Act, 1986. Following the Supreme Court’s order dated April 24, 2023, the appellant refunded ₹22,01,215 to the complainants. After deducting ₹17,08,140 (which is 10% of the BSP) from the total amount paid by the complainants (₹51,12,310), the balance to be refunded amounted to ₹34,04,170. Since ₹22,01,215 has already been paid, the appellant still owes ₹12,02,955 (₹34,04,170 – ₹22,01,215) to the complainants. Thus, the court directs the appellant to pay the remaining amount of ₹12,02,955 to the complainants within a six-week deadline from today.
BIBLIOGRAPHY:
Case name- Godrej Projects Development Limited Vs. Anil Karlekar & Ors. [2025] 2 S.C.R. 343.
For Full document Document click link Below- https://digiscr.sci.gov.in/admin/judgement_file/judgement_pdf/2025/volume%202/Part%20II/2025_2_343-362_1740806843.pdf
[i] The Indian Contract Act, No. 9 of 1872, 5, Act of Parliament (India).
[ii] The Consumer Protection Act, No. 68 of 1986, § 2(1)(r), Act of Parliament (India).